Definition and Detailed Explanation
Assessed value is the value assigned to a piece of property by a public tax assessor for the purposes of taxation. This value is often a percentage of the property’s fair market value and is used to calculate the property tax owed by the property owner. It can vary based on region and specific jurisdictional practices. The assessed value is significant in the real estate sector as it directly affects the property tax obligation of homeowners and investors.
Examples
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Abel’s Property Valuation: Abel receives a statement indicating that the local tax assessor values his property at $400,000. If the law dictates that properties are assessed at 75% of the market value, then Abel’s assessed valuation is $300,000 (75% of $400,000). His property taxes will be based on this $300,000 figure.
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Commercial Property Example: A commercial building in a municipality is appraised at a market value of $1,000,000. The jurisdiction’s assessment ratio is 80%. Therefore, the assessed valuation will be $800,000 (80% of $1,000,000) and the property tax will be calculated on this assessed value.
Frequently Asked Questions
What is the difference between assessed value and market value?
- Assessed Value: A value determined by local tax authorities used to calculate property taxes.
- Market Value: The price a property would likely sell for on the open market.
How is the assessed value determined?
The assessed value is determined by a public tax assessor who evaluates the property. The assessment could be based on a percentage of the fair market value or other factors outlined by local laws and regulations.
Why might the assessed value be lower than the market value?
Assessed values are often conservative, possibly due to infrequent property reassessments, state laws, and conservative appraisal practices. These values are intended for tax purposes and may not reflect current market conditions.
Can assessed value exceed market value?
Yes, in certain conditions, the assessed value can exceed the market value. This might happen due to outdated or infrequent reassessments where the assessed value has not been adjusted to reflect recent market downturns.
How often is property reassessed?
The frequency of property reassessment varies by jurisdiction. Some areas may reassess properties annually, while others may do so biennially or even less frequently.
Related Terms
- Fair Market Value: The estimated price that a property would sell for in the open market.
- Tax Assessor: An official responsible for determining the value of a property for taxation purposes.
- Property Tax: A tax assessed on real estate by the local government based on the value of the unit of property.
- Assessment Ratio: The ratio of the assessed value of a property to its market value.
- Reassessment: The revaluation of property to determine a new assessed value for property tax purposes.
Online Resources
- National Association of Realtors (NAR) - Comprehensive resources on property values and real estate regulations.
- Internal Revenue Service (IRS) - Information on tax regulations related to property.
- United States Census Bureau - Data and statistics applicable to property assessments.
References
- “Property Taxes: An Overview of the Issues and Perspectives,” U.S. Census Bureau.
- “Understanding Property Taxes,” National Association of Realtors (NAR).
Suggested Books for Further Studies
- “Property Taxes and Tax Revolts: The Legacy of Proposition 13” by Arthur O’Sullivan, Terri Sexton, and Steven M. Sheffrin
- “Principles of Real Estate Practice” by David C. Ling and Wayne R. Archer
- “Real Estate Appraisal: From Value to Worth” by Tom Dixon, Sally Dixon, Tony Thompson
